After 6 consecutive daily limit-downs in 8 days, the chairman of Demingli promises not to reduce his holdings. Has the "myth" of these stored shares come to an end?

Summary of Key Points

Recently, A-share storage stocks have experienced a rollercoaster market: their prices soared due to the upward cycle in the storage industry (with some individual stocks increasing by over 300%), but in the past month, they have generally fallen by half (a decrease of 40%-57%). In response to the sharp price drops, several storage manufacturers have taken measures to boost investor confidence, such as their controlling shareholders not reducing their holdings and proposing stock repurchases. However, performance has varied significantly—some companies have seen a huge year-on-year increase in net profit (for example, Jiangbolong’s growth of 622-743 times), while Demingli’s net profit declined quarter-over-quarter in the second quarter. The main concern for the market is whether storage module manufacturers (which do not produce chips themselves) will be the first to lose out on the benefits of the upward cycle. Additionally, the rate of price increases in the storage sector has begun to slow down, and the supply-demand situation is becoming clearer (the shortage is expected to continue until 2027-2028).

I. Sharp Price Drops: From a Boom to a 50% Drop in One Month

Storage stocks were once A-share “stars”: from the beginning of this year to the end of June, their prices reached record highs, with Demingli rising by 318%, Baiwei Storage by 341%, and GigaDevice Technology by 292%, almost tripling in value. However, within just one month, these stocks all plummeted:

• Demingli’s price dropped from 970 yuan per share to 399 yuan per share, a decrease of 57.95%;
• Baiwei Storage’s price fell from 507 yuan to around 240 yuan, a decrease of 52.82%;
• Jiangbolong and GigaDevice Technology also experienced declines of over 40%.

Such dramatic fluctuations caught investors off guard and raised doubts about the future of the storage industry.

II. Companies Taking Emergency Measures to Boost Confidence: No Reductions in Holdings + Stock Repurchases

To stabilize stock prices and investor sentiment, several storage manufacturers have taken the following actions:

• Demingli: The chairman, Li Hu, promised not to reduce his holdings for one year, which sent a signal of confidence to the market—since the owner himself is not selling, it indicates faith in the company’s future.
• Baiwei Storage: The controlling shareholder proposed a stock repurchase of 200-250 million yuan, with the repurchased shares to be directly cancelled (reducing the total number of shares), which will make the remaining shares more valuable and benefit shareholders directly.
• Jiangbolong: The controlling shareholder also proposed a stock repurchase for employee incentive programs—this helps stabilize prices while motivating employees to perform well.

These actions aim to convey the message that the company’s value is undervalued and to prevent further price declines.

III. Mixed Performance: Some Companies Profiting Hugely, Others Declining

The upward cycle in the storage industry has indeed led to significant profits for some companies, but performance varies greatly:

• Companies with Huge Profits: Jiangbolong’s net profit for the first half of the year is expected to be 9.2-11 billion yuan, a year-on-year increase of 622-743 times (from earning 1 yuan last year to over 600 yuan this year); ShannonXinchuang and GigaDevice Technology also saw growth of more than ten times or even eleven times, mainly due to higher prices for storage chips.
• Demingli’s Decline: The company’s net profit for the first half of the year was 5.7-6.5 billion yuan (turning a loss into a profit), but it decreased by 5.7%-29.6% quarter-over-quarter. The company explained this by increased research and development expenses (such as developing new chips) and higher costs for capacity expansion, as well as spending more on customer acquisition and raw material reserves—these investments may affect short-term profits but could lead to long-term growth.

IV. The Biggest Concern for the Market: Can Module Manufacturers Still Benefit from Price Increases?

The main question for investors is whether storage module manufacturers (such as Demingli and Baiwei Storage), which do not produce chips themselves, will be left behind:

• Difference between Manufacturers: Chip manufacturers are at the “source” of storage chips (designing and producing the wafers), resulting in higher profits; module manufacturers assemble and test these chips before selling them to downstream companies (such as smartphone and computer manufacturers).
• Core Competencies of Module Manufacturers: It’s not just about simple assembly! For example, testing is a critical step—chips from chip manufacturers must undergo strict testing to ensure quality, which is a competitive advantage for module manufacturers. Demingli also develops its own control chips and firmware (the “brain” of storage products), meaning they don’t rely solely on assembly for profits.
• Impact of Slowing Price Increases: Previously, rapid price increases in storage chips allowed module manufacturers to profit; however, with the slowdown (DRAM prices increased by 58-63% in the second quarter and expected to rise by only 13-18% in the third quarter), module manufacturers’ profit margins may be squeezed.

V. Clear Supply-Demand Outlook: Shortage to Continue for Years, but Price Increases Will Slow Down

The industry’s consensus on the future is gradually forming:

• Supply Shortage to Persist: Micron indicates that the shortage will continue until 2027; SK Hynix believes 2027 will be the most critical year; JIC Research predicts that NAND flash memory shortages will only ease in the second half of 2027. This means there will still be a demand for storage chips in the coming years, and prices may continue to rise, but the rate of increase will slow down.
• Long-Term Focus on Technology: Both chip manufacturers and module manufacturers need to rely on technology to remain competitive—chip manufacturing processes for chip manufacturers and testing/firmware development capabilities for module manufacturers. Only with strong technology can they profit more during price increases and stay stable during market fluctuations.

In summary, the recent sharp decline in storage stocks is a correction from the previous surge. The companies’ efforts to stabilize the market have temporarily calmed investor sentiment, but there are still doubts about the long-term profitability of module manufacturers. The storage industry will remain in short supply for the next few years, but price increases will slow down. In the end, it will be technology that determines success. Investors should be aware of the high volatility of storage stocks and balance both the potential for industry growth and the risks associated with market cycles.